Here’s a plot twist that catches thousands of PayPal, Venmo, eBay, Etsy, and Cash App for Business users off guard every tax season: the federal government raised the 1099-K reporting bar back up to $20,000 and more than 200 transactions, but a handful of states never went along with it. If you live in one of those states, a payment app can still send you a 1099-K when you cross a much lower line—sometimes as low as $600.
Let’s break down exactly which states these are, what triggers a form, and what it means for your taxes.
First, What Changed at the Federal Level
The One Big Beautiful Bill Act, signed into law on July 4, 2025, repealed the controversial $600 federal 1099-K threshold that had been scheduled under the American Rescue Plan Act. The federal reporting threshold reverted to the old rule—gross payments over $20,000 AND more than 200 transactions in a calendar year—and this change is permanent (applied retroactively to 2022, not just going forward).
In plain English: a third-party payment platform only has to send you a federal 1099-K if you clear both the $20,000 dollar amount and the 200-transaction count. Miss either one, and no federal form is required.
But 1099-K reporting has always had two layers—federal rules and state rules. Several states set their own lower thresholds years ago, and those state laws are still on the books.
The States That Still Report at $600
Five jurisdictions require a 1099-K to be filed at just $600 in gross payments, with no minimum number of transactions:
| State / District | Dollar threshold | Transaction minimum |
|---|---|---|
| Massachusetts (MA) | $600 | None |
| Maryland (MD) | $600 | None |
| Virginia (VA) | $600 | None |
| Vermont (VT) | $600 | None |
| District of Columbia (DC) | $600 | None |
In these five, a single $600 payment across the year can generate a form—even if it took just one transaction to get there.
Two More States With Low (But Not $600) Thresholds
New Jersey and Illinois are often grouped with the $600 states, but their rules are slightly different—still far below the federal $20,000/200 line, just not at $600:
| State | Dollar threshold | Transaction minimum |
|---|---|---|
| New Jersey (NJ) | $1,000 | None |
| Illinois (IL) | Over $1,000 | 4 or more transactions |
So Illinois requires both more than $1,000 in payments and at least four separate transactions. New Jersey triggers at $1,000 regardless of transaction count.
Worked Examples
Example 1: A Massachusetts reseller
Priya sells vintage clothing on eBay and collects $1,400 across 9 sales in 2026. Federally, she’s nowhere near $20,000 or 200 transactions, so no federal form is triggered. But because she’s in Massachusetts ($600, no transaction floor), eBay will still issue her a 1099-K. She’ll see the form even though she “didn’t make much.”
Example 2: An Illinois freelancer
Marcus gets paid through PayPal for design work and receives $900 over 6 transactions. Illinois needs over $1,000 AND 4+ transactions. He cleared the transaction count but not the dollar amount, so no Illinois 1099-K is required. If a seventh client pushes him to $1,100, he’d then meet both tests and get a form.
Example 3: A Texas seller
Dana lives in Texas, which has no special state threshold, and takes in $5,000 over 40 transactions on Venmo for a side hustle. Neither the federal $20,000/200 test nor any state rule is met, so no 1099-K goes out at all.
A Critical Reminder: No Form ≠ No Tax
This is the point people most often get wrong. Whether or not you receive a 1099-K has nothing to do with whether the income is taxable. All income from selling goods or services is reportable on your federal and state returns, full stop. The 1099-K is just a paperwork trigger—an information return that also goes to the IRS and your state.
One nuance: personal transactions—splitting rent, paying back a friend, gifts—are not taxable and shouldn’t be on a business 1099-K in the first place. If you mix personal and business activity in one account, that’s exactly how the wrong amount ends up on a form. Keep a separate account or clearly tag business payments.
What To Do If You Get an Unexpected 1099-K
- Don’t ignore it. The same form was filed with your state and the IRS, so the amount is expected to appear on your return.
- Check the number. The box on a 1099-K shows gross payments—before fees, refunds, or shipping you paid. Your taxable profit is usually lower.
- Separate personal from business. If personal reimbursements were swept in, gather records (dates, senders, purpose) to back out those amounts.
- Report and adjust. Report business income on the correct schedule, then deduct legitimate costs. For genuinely personal amounts reported in error, follow current IRS guidance for showing an offsetting adjustment, and ask the platform to correct the form.
- Keep your own log. A simple spreadsheet of sales, fees, and refunds makes reconciling a 1099-K painless.
Frequently Asked Questions
If the federal threshold is $20,000, why did I get a 1099-K for $700?
Almost certainly because of your state. If you’re in Massachusetts, Maryland, Virginia, Vermont, or Washington DC, the state threshold is $600 with no transaction minimum, so platforms report you at the state level even when you’re far below the federal line.
Does receiving a 1099-K mean I owe tax on the whole amount?
No. The form shows gross payments, not profit. You subtract business expenses, platform fees, refunds, and your cost of goods. You only owe tax on your actual net income—and truly personal transfers aren’t taxable at all.
Are New Jersey and Illinois really “$600 states”?
Not exactly. Both are low-threshold states but sit at $1,000, not $600. Illinois also requires four or more transactions in addition to crossing $1,000; New Jersey has no transaction minimum. They’re often lumped in with the $600 group because they’re well below the federal standard.
Will these state thresholds change?
State laws can change independently of federal law, and thresholds are periodically revisited. Because dollar amounts and transaction rules can be updated, confirm your state’s current figure with your state’s department of revenue (or your tax preparer) before filing.
The Bottom Line
The federal 1099-K threshold is back to $20,000 and 200 transactions—but that headline number doesn’t apply everywhere. If you sell or freelance from Massachusetts, Maryland, Virginia, Vermont, or DC, expect a form at $600. New Jersey and Illinois report at $1,000 (Illinois with a 4-transaction rule). Wherever you live, remember the golden rule: the form is optional paperwork, but reporting your real income never is. Track your sales, separate personal from business, and a surprise 1099-K becomes a non-event.
WalletWisp is an informational resource, not financial or tax advice. For guidance on your specific situation, consult a qualified tax professional or your state’s department of revenue.
